What a newcomer to Canada needs to know about the Canada Pension Plan

by | Nov 8, 2023 | Finance and Business

If you’re a newcomer to Canada and you’ve got a job, one of things you may notice on your paycheque is a deduction for the Canada Pension Plan, known as CPP. This means you are one of more than 21 million contributors and beneficiaries to a stable post-retirement income plan.

Anyone over the age of 18 and under the age of 70 who works in Canada, outside of Québec, and earns more than $3,500 per year must contribute. This means that regardless of your status as a newcomer to Canada, if you are working in the country, you are contributing to the plan. And since the plan is based on your contributions, it will always be yours, regardless of where you live in the world.

The amount you receive each month in retirement is based on your average earnings throughout your working life, your contributions to the plan (which are based on how much you earn), and the age you decide to start your benefits.

For 2023, the maximum monthly amount you could receive if you start your pension at age 65 is about $1,300. The average monthly amount paid for a new retirement pension at age 65 in April 2023 was about $760, according to the federal government.

CPP is a partnership of the federal government and the provinces, except for Quebec, which runs its own pension plan. The federal government administers the plan, but contributions by individuals and employers not needed to pay current benefits are transferred to CPP Investments, a professional investment management organization that operates at arm’s lengths from the government.

While national pension plans in some countries, including the U.S., are not considered sustainable, Canada’s plan is designed to provide a stable source of retirement income for many generations.

It’s the best-performing pension fund in the world during the past decade, according to Global SWF, an international consulting and research firm that tracks the returns of public pension funds. A recent review by a federal government agency concluded the plan is sustainable for at least the next 75 years and beyond.

Find more information at cppinvestments.com

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